Understandingthelegalchallengesandimplicationssurroundingsocialmedia

Solar Energy, Trade Secrets, and Unfair Competition

On January 13, 2020, a solar energy sales lead generation company settled a federal lawsuit against several defendants, including a former employee. Both the initial complaint and settlement described the important role of social media to the business. (Solar Connect, LLC v. Endicott, Case No. 2:17-cv-01235 (D. Utah Jan. 13, 2020) (stipulated permanent injunction).

Background

The plaintiff in this case is Solar Connect, which is in the business of solar energy sales lead generation. According to the company’s complaint, the company “pioneered unique proprietary and confidential information and systems for generating large numbers of quality leads.” (Complaint ¶ 12) Those systems included ads and pages on various social media platforms, as well as proprietary back-end software programs.

The case began in 2015, when Solar Connect hired an individual in a senior management position. He signed a non-disclosure agreement, and was given access to the company’s confidential information and trade secrets. According to the complaint, he was trained on, or had access to, the company’s confidential backend parameters of its social media marketing system, and he had significant responsibility over various areas of the company’s online marketing efforts. (Complaint at ¶¶ 26-27) The company also gave him logon credentials to confidential social media ad marketing accounts, and client portal login information—only four solar Connect employees had such credentials.

Unfortunately, after approximately 8 months, the company began questioning his trustworthiness and terminated his employment in January of 2017. (Complaint at ¶ 33)

Approximately four or five months later, Solar Connect discovered that “someone was copying their lead generation system and methods as well as their landing page platform, social media strategies, and online marketing ads.” (Complaint at ¶ 35) Further investigation revealed that the other company was targeting the same ZIP codes as Solar Connect, was using similar landing pages and social media profiles, and provided users with similar signup forms. (Complaint at ¶ 36)

The company later discovered that, although it had changes almost all of its logon credentials on the day it terminated the former employee, it neglected to change the credentials for a central control panel. The company’s investigation determined that an unauthorized third party accessed that control panel in March of 2017—without any failed login attempts or evidence of brute force access attempts (Complaint at ¶ 39) In other words, apparently the intruder used access credentials. The investigation led the company to believe that the former employee and several others, including several “shell companies,” were the cause.

As a result of the defendants’ actions, the complaint alleged:

Solar Connect’s organic and inorganic search rankings fell,

it was forced to compete against its own marketing and advertising system in bidding for ads,

its ads—because the defendants’ ads appear to be coming from Solar Connect—were of such volume that they were marked as “spam,” and

Solar Connect was blacklisted by at least one social media platform.

(Complaint at ¶¶ 48-55)

The Lawsuit

Solar Connect filed a lawsuit in federal court in November of 2017, claiming, among other things, that the defendants’ actions:

(1) violated the federal Defend Trade Secrets Act (DTSA);

(2) constituted copyright infringement; and

(3) constituted unfair competition in violation of the federal trademark law known as the Lanham Act.

With respect to the unfair competition claim, the defendants’ actions allegedly led to “Solar Connect’s valuable online lead generation content being blocked by key social media and other online marketing platforms.” (Complaint at ¶ 137)

Approximately six months after filing the complaint, the plaintiff used the DTSA to obtain an ex parte seizure order and evidence preservation order to obtain electronic evidence. (2018 WL 2386066) In the court’s order, the court gave direction to law enforcement relating to the seizure of electronic evidence, and ordered the defendants to preserve “any emails, software, and code used for the related websites and platforms, online and/or social media advertising.” (Order, § B)

The Settlement

The parties settled in January of 2020 (2020 WL 161102). The settlement included a stipulated permanent injunction filed with the court. The injunction specifically prohibits the defendants from using Solar Connect’s parameters for ads using social media platforms, and ordered the defendants to take down specified social media accounts. Going forward, the defendants are permanently enjoined from:

(a) Copying, displaying, publishing, producing, distributing, preparing derivatives, or using any of Solar Connect’s online lead generation or marketing materials, including display ads, landers, sales lead contact submission forms, platforms and code, social media sites, . . . and any other social media or online marketing platforms.

And one of the named defendants and each of its

agents, representatives, servants, employees, independent contractors, successors, and assigns, and all those acting in concert or participating with any of them, are hereby permanently enjoined and restrained from further using . . . any other social media or online marketing platforms for publishing any online material relating to solar energy systems or for purposes of solar energy sales lead generation.

(Stipulated Permanent Injunctions at §§ 2(a) & (2(c)) If there were any financial terms to the settlement, they were not disclosed.

Takeaways

This case serves as a reminder of several “best practices”:

1. When an employee starts, the onboarding process should include having the employee sign an appropriate non-disclosure agreement—and be sure to include an confidential social media credentials.

2. If your company has trade secrets, be sure to protect them and limit access to them, including social media methods, algorithms, and credentials.

3. When an employee leaves, change all passwords to all accounts and systems to which the employee had access.

4. When a key employee leaves, keep an eye on competitors’ activity, including on social media.

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With the ever expanding uses of social media, corporations and businesses struggle to stay abreast of the legal impact these technologies could have on them. Our blog, the Social Media Law Bulletin, will update counsel and business leaders on a wide range of legal developments that arise with social media.

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